Wednesday, July 01, 2020

An Interesting Juncture in History

Just as the rewards of central-bank bubbles have not been evenly distributed, the pain created by the collapse of the bubbles won't be evenly distributed, either.
We've reached an interesting juncture in history, and I don't mean the pandemic. I'm referring to the normalization of extremes in the economy, in social decay and in political dysfunction and polarization.
Let's ask a very simple question. The S&P 500 stock index went up five-fold from its 2009 low at 667 to a recent high around 3,400. Did your income rise five-fold since 2009? Probably not.
Houses that sold for $150,000 in 2000 are now valued at $900,000, a six-fold increase since 2000. Did your income rise six-fold since 2000? Probably not.
State university tuition has risen about 2.5 times from 2004 to 2019. Did your income rise 2.5-fold since 2004? Probably not.
Even burritos from the local taco truck have tripled in price in the past 15 years. Did your income triple? Probably not.
The average household income in 2000 was about $42,000. To match the six-fold increase in urban housing valuations, that household would have to earn $252,000 this year. How many households saw their income soar from $42,000 to $252,000? Not many.
The average household income in 2009 was about $50,000. To match the five-fold increase in stock market valuations, that household would have to earn $250,000 this year. How many households saw their income soar from $50,000 to $250,000? Not many.
To keep up with tuition (never mind healthcare insurance), the household earning $45,000 in 2004 would have to bring home $112,000 this year.
The household earning $100,000 in 2004 would need to boost its income to $250,000 to keep up with college tuition. How many households boosted their income from $100,000 to $250,000 in the past 15 years? Not many.
In other words, what's been normalized over the past 20 years is the total subjugation of labor by central-bank inflated asset bubbles that benefit the top 0.1%. Labor has lost ground while assets have soared, leaving those whose income is earned less able to buy over-valued assets and more prone to borrowing money to maintain their lifestyle-- a situation I call debt serfdom.
Two generations ago, nobody knew the name of the Federal Reserve's chairperson. Now that chairperson is in the news virtually daily. The media exposure of the Fed chair far exceeds that of elected officials such as the Speaker of the House of Representatives or the Senate Majority Leader, or the Chief Justice of the Supreme Court.
In effect, the nation has become dependent on its central bankers and their limited agenda (expand the wealth and power of the financial sector). The elected government and the real-world production of goods and services both have taken a back seat to conjured "wealth."
The ascendance of finance and the decay of labor's value is the result of the ascendance of monetary stimulus as the core driver of "wealth" and thus "growth." It was once expected that consumption would be funded by wages earned by labor, and investment would be funded by savings set aside from earnings. That era is long past. What's been normalized is a systemic reliance on debt to fund consumption and on the euphoric "animal spirits" of the wealth effect generated by soaring assets such as homes and stocks.
History offers a number of parallels to the ascendance of borrowed capital over labor and central bank money-printing over the creation of productive value. History suggests eras that have normalized economic and financial extremes--extremes of inequality, policy, and decay--haven't ended well for anyone.
Just as the rewards of central-bank bubbles have not been evenly distributed, the pain created by the collapse of the bubbles won't be evenly distributed, either.
Recent Podcasts:
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
Thank you, Betty W. ($50), for your splendidly generous contribution to this site -- I am greatly honored by your steadfast support and readership.
 
Thank you, John G. ($50), for your superbly generous contribution to this site -- I am greatly honored by your support and readership.

Terms of Service

All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.


Our Privacy Policy:


Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative). If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.


PRIVACY NOTICE FOR EEA INDIVIDUALS


This section covers disclosures on the General Data Protection Regulation (GDPR) for users residing within EEA only. GDPR replaces the existing Directive 95/46/ec, and aims at harmonizing data protection laws in the EU that are fit for purpose in the digital age. The primary objective of the GDPR is to give citizens back control of their personal data. Please follow the link below to access InvestingChannel’s General Data Protection Notice. https://stg.media.investingchannel.com/gdpr-notice/


Notice of Compliance with The California Consumer Protection Act


This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising. If you do not want any personal information that may be collected by third-party advertising to be sold, please follow the instructions on this page: Do Not Sell My Personal Information


Regarding Cookies:


This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative) If you have other privacy concerns relating to advertisements, please contact advertisers directly.


Our Commission Policy:

As an Amazon Associate I earn from qualifying purchases. I also earn a commission on purchases of precious metals via BullionVault. I receive no fees or compensation for any other non-advertising links or content posted on my site.

  © Blogger templates Newspaper III by Ourblogtemplates.com 2008

Back to TOP